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China's latest tax cut brings positive impact up to $5b

Updated: Dec 25,2019 11:45 AM    CGTN

China's latest measure to lower or remove import duties on over 850 items of products from January 1, 2020 will result in "direct positive impact" of between $3 billion and $5 billion per year, according to Wang Jianhui, general manager of research and development department from Capital Securities.

"I think the direct positive impact could be $3 billion to $5 billion per year, after all these measures are implemented. But I think in the long run, in the next three to five years, the tax cuts could be increased to up to $10 billion a year," Wang said.

Future expected tax cuts could reach up to $10 billion a year, within the next three to five years, Wang told CGTN.

The Customs Tariff Commission of the State Council on Dec 23 announced that a range of products, including frozen pork and avocado, and some high-tech products and parts would have their tariffs lowered or removed. One of the goals of expanding imports is to meet Chinese people's improving living standards, it said.

Wang added that his estimate assumes that all measures were implemented, and that other tariffs for products would eventually be cut as well.

"More importantly, the operational environment for importers has become quite positive. There would be more businesses surviving the current cyclical weakness," he said, adding that more growth can be expected.

A Bloomberg report estimated the imports of the listed items totaled $389 billion in 2018.

Meanwhile, China has also unveiled new guidelines to support private enterprises in the country. The move opens up more sectors for investment from private companies, and aims to strengthen institutional mechanisms which create a better business environment, which is all part of China's efforts to deepen reforms and foster high-quality development.

Wang said that the new guidelines are significant and timely.

"Right now, the private fixed-investment has been slowing down from 8.7 percent a year ago to 4.5 percent last month. So it is urgent for the government to rebuild the confidence in the private sector," he said, noting that it may be the first time that the central government has issued guidelines specifically for private entities.

"After these new policies, I think we have a bigger chance to see private investment pick up within the next few quarters, we can see the economy getting more support," he added.